What is Gambling?

Disclaimer

Before I talk about gambling, let me add this disclaimer: I have never bought a lottery ticket in my life, nor played at any sort of casino. The only gambling I recall that I've ever done is buying charity raffle tickets a few times, and once kicking a few bucks into a football pool at the office. And I haven't done those things in many years.

Defining what we mean

We were talking about gambling in a Bible study a few days ago. It struck me that before we can discuss the ethics of gambling, we need to define what we mean by the word.

Whenever someone says that he believes gambling is evil, someone on the pro-gambling side will always say something like, "Hey, how can you condemn gambling? You gamble all the time yourself. You gamble on the stock market. You gamble every time you drive a car." Or similar examples.

There is some validity to this. If we define "gambling" as "taking a risk", or "doing something where the outcome is not guaranteed", then clearly we all gamble every day. Getting a new job is a gamble: The job may turn out to be everything you dreamed, or the boss may turn out to be a jerk or the company may go bankrupt next week. Driving a car is a gamble: You may get where you're going, or you may be killed in an accident. Etc.

But this definition is not very useful. It's hard to imagine anything you could do whose outcome is absolutely 100% certain. If you take a bite of food, you may get nourishment from it, or you may get food poisoning. If you put your card in the ATM, it may give you money, or it may not. If you flip a light switch, the light may come on, or the bulb may burn out. A word that describes everything you could possibly do doesn't help to distinguish one action from another. A word that describes everything, describes nothing.

A more realistic definition of gambling, a definition that matches what most of us are thinking of when we use this word, must include the idea of a transaction where one person's gain is, inevitably, another person's loss. Gambling involves what mathematicians call a "zero sum game", that is, no one can gain unless someone else loses, and the amount of the gain is equal to the amount of the loss.

Contrast this with a business transaction. In an honest business transaction, both parties walk away better off than when they arrived. Take a simple barter transaction. Suppose I have an apple and you have an orange. But I love oranges and don't like apples, while you like apples and don't like oranges. If we trade, we are both better off. Of course today we usually trade for money, but the idea is the same. I am willing to give my employer 8 hours a day in exchange for a certain amount of cash. To my employer, the work I do in that 8 hours is worth more than what they pay me. To me, the things I can buy with the money I make are worth more than 8 hours of my time. (While I would like to have more free time, I would rather not spend that time starving to death in an alley, and without an income, that's what I'd be doing.) In a business transaction, everybody wins.

But in gambling, one person walks away richer and the other walks away poorer.

I'd also say that a part of the definition of gambling is that not only is there a winner and a loser, but that both parties voluntarily enter the transaction expecting there to be a winner and a loser.

If someone knocks you over the head and takes your money, he wins and you lose. But this is not "gambling", because you did not engage in the transaction voluntarily. This is "stealing". Likewise if you make what you consider a fair business deal, but the other person takes your money and never delivers the product, he wins and you lose But this is not "gambling" because you did not expect there to be a winner and a loser. This is "fraud".

Less dramatically, suppose you buy a product, the other person sells it to you in good faith, but it turns out to be worthless. Like, suppose you buy a used car. The seller had no idea that there was anything wrong with the car, but a month later the engine blows up. The seller has gotten cash for a car worth much less than either of you thought. He wins and you lose. But this was not "gambling" in the literal sense, because when you made the deal -- again, assuming that the seller honestly did not know that the car would blow up -- you both thought that it was a fair deal and you were each getting something you wanted.

Technicalities

For something to be "gambling", the stakes don't have to be cash. Whether the winner of a contest gets $10, or the winner gets a box of candy or case of beer or some other thing of value doesn't change the basic idea.

I think pretty clearly, the same "game" or activity might or might not be gambling depending on whether there are any tangible stakes. If you play poker for money, that is clearly gambling. But if a group of friends get together and divide up some poker chips, play for chips, and at the end of the game throw the chips into a box, and no money ever changes hands, surely that is not gambling.

The phrase "games of chance" is often used as a synonym for gambling. But a game doesn't have to be chance to be gambling, and not all games of chance are gambling. When I played Candy Land or Chutes and Ladders with my small children, these were clearly games of chance. Winning was entirely determined by the luck of a die roll or a card draw. But this was not gambling, because no money or other stakes were involved. On the other hand, people routinely bet on horse races and baseball games. Clearly these are not chance: The outcome is primarily determined by the skill and training of the contestants. A gambling game does not have to be a game of chance. It just has to be difficult to predict the outcome.

Examples

Now let's consider a few things that people sometimes refer to as "gambling":

Driving. There involves risk. You might be killed in an accident. But while you are certainly a loser in such a situation, there is no winner. You are not betting against anyone. You are just doing something that has dangers. The same can be said for many other activities that involve danger. When we call this a "gamble", I think we are really using the word gamble as a metaphor. It's like when we talk about a "war on cancer": it is not a literal war with guns and bombs, but it is like a war in the sense that it involves commitment and sacrifice and the hope of ultimate victory.

Buying stock. This is certainly risky. Stock prices may go up or down, and which they do is very hard to predict. But it is not a zero-sum game. Buying stock is investing in a business. When things go right, everybody wins: Customers get a product they want, employees get paid, and the stock holders make money. When things go wrong, everybody loses: Customers get stuck with a poorly-designed or defective product, employees never get paid for the hours they worked, and the stock holders lose money. If the stock price goes up steadily, Person A can buy the stock, sell it to B at a profit, and then B can later resell it to C at a profit. There is certainly no guarantee that everybody will win, but that is normally the goal of all involved.

Competing for a trophy. There are many sports leagues where everybody pays some money into a pool which is used to buy trophies for the winners. Is the trophy "something of value" that the teams are gambling for? I would say that this is not gambling, because the trophy is not desired for its monetary value, but rather as a tangible symbol of victory, not fundamentally different from an announcement that Team A won the competition.

Insurance. Consider life insurance. You pay a small amount of money each month while you are alive. When you die, they pay you -- well, your heirs -- a large amount. If you live a long time, you pay more than you get back. If you don't live so long, you collect more than you pay in. This sounds a lot like gambling. The insurance company is betting that you will live long enough to pay more in premiums than they pay out in claims. You are betting that you will not. If you die young, you win. This is a zero-sum game. Your gain is the insurance company's loss, or vice versa. Nothing of value is added to the economy: money is just transferred between you and the insurance company. You both enter the transaction voluntarily. You both know that there will be a winner and a loser. How is this different from playing at a casino?

Insurance salesmen (and others) sometimes reply that not buying insurance is the real gamble. But this is only true in the metaphorical sense of "risk". If you do not buy medical insurance and then you get sick and need treatment, you certainly have a big loss. But there is no winner. You presumably have to pay the doctor or the hospital or whomever, but they would have gotten paid if you had insurance. There is no advantage to the doctor from you not having insurance. You are not playing against any one. Not having insurance is not gambling in the literal sense.

Door prizes and similar promotions. Businesses often give away products or services using some sort of random drawing. For example, I used to eat at a restaurant where you could throw your business card in a bowl and once a month they'd draw some number out and those people got a free lunch. Was this gambling? I think not. From the customer's point of view, there was no risk of loss. You might win, but you had nothing to lose. From the restaurant's point of view, there was no risk of loss. They decided exactly how many lunches they were going to give away, and so precisely controlled the cost. I presume they considered this a marketing expense. You could argue, I suppose, that every customer paid a little extra for a meal to cover the cost of the free lunches given away, and this makes it gambling. But I think that's a stretch. If the restaurant didn't have these drawings, they would probably have spent the same amount on some other form of advertising, so abolishing the drawing likely wouldn't save customers any money. I would say that this is not gambling, but it is not clear cut.

When is gambling not gambling?

Defenders of gambling sometimes say that what they are doing is not really "gambling", but rather paying for entertainment, with the possible bonus of getting something back. There is validity to this.

Let me create a series of scenarios here. Suppose that someone opened a "game room" where for some fixed fee you could come and play ping pong or checkers or video games or whatever for some period of time. That is, you pay a rental fee to use the building and equipment for entertainment. I think it is pretty clear that there is no way that you could call this gambling. There are no prizes, no risk, and no losers. The owner collects his fees, and the players get exactly the entertainment that they have paid for. Of course, you personally may or may not think that the games made available are fun to play, or that the fees charged are reasonable. But as long as the owner announces up front what the fees are and the customers voluntarily agree to this deal, there is no element of gambling.

The above is true even if some or all of the games are games that people elsewhere gamble on. For example, suppose the game room rents out decks of cards, poker chips, a table and chairs for $5 per hour per player. Again, assume there are no prizes: the players are just playing for the fun of the game. Everyone who sits down at the table is given some number of poker chips, and when the game is over they are just put back in the box with no payout. This is still not gambling, because there is no money or other thing of value at stake.

But now suppose the game room owner makes one change: It still costs $5 per hour to rent the poker table, cards, and poker chips. But he also offers a prize: The player who has the most chips at the end of the game gets a coupon good for a free hour of gaming. Now is it gambling?

This is a lot like the door prizes and promotions discussed earlier. The coupon has value: it's worth $5. The player had to put up some cash to be eligible to win it. But he was perfectly willing to pay that cash for the entertainment of playing the game. Is he gambling? Or just benefitting from a marketing promotion? I think this is not gambling, but it is on the border line.

Finally, suppose that instead of a coupon for a free hour of gaming, the shop owner offers a $50 prize. A winner may actually make money on the deal. Does this make it gambling? This sounds very shaky. At that point we're saying that if you play a game for a $5 prize it is not gambling, but if you play for a $50 prize it is gambling. Can something really change from not-gambling to gambling just because the amount of money involved changes? I think all would agree that a lottery with a $1 million prize is gambling. If the prize was reduced to $100, would it cease to be gambling? What if the prize was reduced to $10? $5? A rich person might say that $1000 means nothing to him -- he spends more than that on lunch everyday. Would that mean that playing a game for a $1000 prize is not gambling for the rich person, but is gambling for a poor person?

What we really come back to here is the idea that gambling necessarily involves a zero-sum game, a winner and a loser. If all parties agree that there is entertainment value in playing whether they win or not, then arguably even the losers are getting something for their money: they are paying for entertainment.

Suppose Al pays $100 to attend a concert. In exchange for his $100, he gets a couple of hours of entertainment. Meanwhile Bob takes $100 to a casino and plays until he's lost the money. In exchange for his $100, he gets a couple of hours of entertainment. Is there a moral or ethical difference between the two?

Moral judgements

The point of this article is not to make a moral judgement about gambling. I am just trying to discuss the preliminaries to making such a moral judgment.

Some of what I said above might be considered a defense of gambling, so let me hasten to add an important caveat: The "entertainment justification" for gambling assumes that the player is prepared to pay some amount that he can reasonably afford for entertainment, and that once he has lost this amount, he goes home. I don't know how many gamblers follow such a "responsible" strategy. Clearly many do not. Many people gamble away their life savings in desperate hope of the big win.

Island of Sanity